Friday, July 11, 2008

Nielsen, the independent market research firm, just released a report that shows the U.S. ranks first out of sixteen countries surveyed with respect to mobile Internet usage penetration. Over 15% of the wireless subscribers in the U.S. surveyed were identified as active users of the mobile Internet. Among others, the U.S. ranked ahead of the UK (No. 2); Italy (No. 3); France (No. 7); Germany (No. 8); and China (No. 9). The Nielsen report, with many other statistics, is here.

Ah, statistics. I have no doubt, if not carefully analyzed, that they can be abused and misused for rhetorical purposes. This certainly has been the case with respect to the OECD broadband reports, which purports to show the U.S. far behind other countries in broadband penetration. There are many reasons which have been widely discussed why these OECD reports don’t present an accurate account of the remarkably rapid growth in the ubiquitous availability and usage of broadband in this country.

So without at this point vouching for all of Nielsen’s statistics, it does seem hard to gainsay the conclusion that, “[i]n the U.S., Mobile Internet has become a mass medium.” This is a very positive development from a competitive and economic standpoint. The U.S.’s lead in the Nielsen rankings should be taken as an indication that this country’s generally free market-oriented wireless and broadband policies are working.

Where we have run into trouble with regard to broadband and wireless is when our policymakers have been seduced by notions that government regulation or intervention is needed “to make the market work better” or to solve, in an anticipatory fashion, some “marketplace abuse” that doesn’t yet exist and may never do so. Forays into net neutrality regulation, such as the FCC’s ill-fated 700 MHz auction for the C Block, have not turned out well. Without imposing new regulatory mandates, wireless providers are moving towards implementing more open platforms in response to marketplace demands.

The pace of innovation in the wireless world is almost dizzying, especially if you are past a certain age -- say, thirty. But it’s real, and today’s release of Apple’s latest IPhone, running on AT&T’s 3G network, will operate at faster speed and incorporate even more new features and functions. And it’s cheaper still. This latest phone, along with those of AT&T’s competitors, are sure to spur even more mobile Internet usage that will be reflected in Nielsen’s next report.

The FCC should not be thinking of ways to intervene in the market, but rather ways to promote additional facilities-based entry so there will be even more marketplace competition. Two current matters before the Commission come immediately to mind. The agency is considering imposing a mandate requiring the winner of the next auction for Advanced Wireless Spectrum (“AWS”) to provide the public with “free” access to the proposed national wireless broadband network. This mandate to encumber the auction in this way will decrease substantially the revenues realized to the detriment of America’s taxpayers. As I said above, the rapid growth in broadband availability and usage in this country has been remarkable. The FCC’s own data shows that broadband service is available in 99% of the nation’s zip codes in which 99% of the nation’s population lives.

To the extent there is a concern about what the FCC called in its AWS news release “the ubiquitous availability of affordable broadband services,” the proper way to address that concern is by carefully and narrowing targeting any subsidies to low-income consumers or to truly unserved areas. The people in Aspen don’t need more subsidized communications service. The FCC should not adopt a regulation requiring the AWS auction winner to provide a ubiquitous free service because this mandate surely will result in less efficient use of the spectrum than would responsiveness to the marketplace and foregone revenues to the U.S. Treasury. For more on this, see my recent testimony at Chairman Markey’s hearing on universal service.

On the other hand, the FCC should ensure that it is processing the Clearwire-Sprint Nextel application to form a new company to build out a new high-speed WIMAX wireless broadband network in as timely fashion as it can. With the Sprint-Clearwire combination, and the backing of major strategic partners such as Comcast, Google, and Intel, the proposed WIMAX network offers the prospect of introducing another nationwide competitor in the broadband marketplace. Yet another broadband provider would make the existing competition more robust.

If policymakers will avoid imposing new regulations when markets are already workably competitive, while acting to promote additional facilities-based competition when this can be done without imposing new regulations, it is likely that the U.S. will retain its leadership in the high-tech area, including the mobile Internet.